Chimilio Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,360 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting: Actual results for January:
The occupancy expenses in the flexible budget for June would be closest to:
A) $13,802
B) $14,100
C) $14,040
D) $13,480

Question

Chimilio Clinic uses client-visits as its measure of activity. During June, the clinic budgeted for 3,400 client-visits, but its actual level of activity was 3,360 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for June:Data used in budgeting:  Actual results for January:
 The occupancy expenses in the flexible budget for June would be closest to:
A) $13,802 
B) $14,100 
C) $14,040 
D) $13,480

Quizplus · Accepted Answer

Flexible budget occupancy expenses = budgeted fixed occupancy expenses + (budgeted variable occupancy expenses per unit * actual activity)

Budgeted fixed occupancy expenses = $4,500
Budgeted variable occupancy expenses per unit = ($17,000 - $8,500) / 4,000 = $4.50 per unit
Actual activity = 3,360 client-visits

Flexible budget occupancy expenses = $4,500 + ($4.50 * 3,360) = $14,040

Therefore, the closest option is C ($14,040).

Chimilio Clinic Uses Client-Visits as Its Measure of Activity